Web Site Features Home Buyers Should Look For
buyers who need a purchase mortgage are less likely to use
the internet to find one than are existing owners looking to
refinance, yet the benefits of on-line shopping are just as
large if not larger for home buyers. The problem may be that
home buyers expend so much time and energy on finding the
right house that they are relieved to find that there is an
easy path to a mortgage – which is to shift most of the
responsibility to the loan officer recommended by the real
estate agent or the builder.
Finding your own mortgage on-line can result in lower costs
and better decisions than taking the easy path, provided
that the web site or sites that you shop have the right
features. This article describes the site features you
should look for.
Deal only with sites that receive prices directly from lenders’ internal pricing systems. These posted prices are those the lender would lock – commit itself to legally -- on the day shown. If the site does not give you a price quote until you are contacted by a loan officer, the price may or may not be the posted price and you can’t depend on it.
Versus Multi-Lender Sites
Multi-lender sites are a great
they allow you to compare the prices of a number of lenders,
all formatted in the same way, in a single operation. The
major features of 14 multi-lender sites are shown in my
How Effectively Can You Shop at Multi-Lender Web Sites?
The down side of multi-lender sites to some borrowers is
that the lenders are mainly small firms and very likely you
won’t recognize any of their names. If you want to select
among large name firms, you must visit their individual web
sites and establish comparability between their different
systems, which can be a major hassle that none of them try
to make easy.
In my view, the best approach is to shop prices anonymously,
until such time as you have made a decision to contact a
lender, at which point you only want to deal with that
lender. Until then, keep your ID to yourself.
If you price shop
multiple lenders, you must provide them all with all the
information about your transaction that affects the mortgage
price, but that does not include your name, email address,
social security number or street address. If the input form
includes such contact information, you will be besieged by
multiple loan officers quoting prices that mean nothing –
except, perhaps, to identify which one is the biggest liar.
The price of a fixed-rate mortgage is the interest rate,
lender fees expressed as a percent of the loan, called
“points”, and fees that are a fixed dollar amount. The site
should display all three components, and on ARMs it should
also show the margin, index and rate caps. If the prices
shown are not complete, cross the site off your list.
Fully Adjusted Prices
You want the prices you shop to be adjusted for all the
features of your transaction that affects the price. These
are: zip code of property, occupancy type, property type,
loan purpose, loan amount, down payment (equity), credit
score, lock period, and whether you want to waive escrow.
If the price you receive from the web site is not fully
adjusted for all these factors, then you are pricing someone
else’s loan, not yours. If there is a relevant feature of
your loan that the site does not ask you about, it assumes
that the factor is the best possible, which generates the
lowest price -- and has the largest potential for an
unpleasant surprise. If the site does not ask for your
credit score, for example, it most likely will assume that
you have a score of 800, which means that if your actual
score turns out to be significantly lower, your actual
mortgage price will be higher. You won’t find that out,
however, until after you have applied and your loan has been
You want the prices you see on the screen to be live, not
obsolete. Since lenders reset their prices every day, and
sometimes during the day, a system providing timely prices
must be directly linked to the system that generates prices.
If prices on the web must be updated through a separate
process by someone who might be at lunch or out sick when
the market changes, the web-based prices may become
To determine whether the prices on the screen are live, look for an accompanying “as of” date and time. On my site, the time shown is the time the user clicks on the “Calculate” button, because the system bases its calculations on new prices obtained directly from each lender’s pricing system every time it does a calculation. Other sites may price only once a day, usually first thing in the morning, which means that a price change during the day will not be shown until the following day. If no time is shown, don’t waste yours on that site.